Conducting Mid Year Budgeting and Spending Reviews

Ideally, midyear budget and spending reviews are part of a more frequent financial review cycle to ensure dollars are spent strategically and school districts are not over or underspending at the end of the year. Unfortunately, many school districts fail to conduct regular financial reviews because the process is often time consuming. This doesn’t have to be the case. With the recommendations outlined below, districts can glean high level insights that can make a significant difference now and work their way to deeper insights over time.

The Midyear Review

A common midyear review method is using a source and pace analysis to gain a quick sense of financial performance for your schools and departments.

Source and Pace Analysis

The Source and Pace analysis looks at the pace of spending across selected funding sources to gauge whether a school or department is at risk of overspending or underspending at the end of the year.

Simply put, pace is:

  • a comparison of the percentage of budget remaining versus the percentage of the fiscal year remaining, and

  • an assessment of whether the school or department is spending too fast, too slow, or on track.

Setting the Pace

When setting the pace, first identify the funding sources to be reviewed and the budgeted and remaining funds associated with those funding sources.

Once the sources and cutoff dates are identified, calculate the percentage of the year remaining for each source. Keep in mind that spending deadlines can vary for different funding sources, and some schools may have different spending cutoffs than schools who will be out for the summer months. Be sure to factor in these circumstances when calculating the percentage of the year remaining for your district or school.

Adjusting the Pace

When calculating the pace or percentage remaining in the fiscal year, it’s important to consider historical spending trends. These trends will allow you to better anticipate any upcoming spikes or lulls that may appear in the second half of the year and provide you an opportunity to adjust your spending accordingly.

In the chart for a sample district below, notice the large spike in spending that occurs during the spring months, likely as budget owners rush to spend down funds before the end of the fiscal year. If you notice such a trend within your district, ask yourself, “Was this a planned event? Is this the result of an unexpected expense, like a piece of equipment breaking, or just a change of priorities over the course of the year? Was something allocated in the wrong expense category? What was not accounted for?”

Taking the time to reflect on and adjust your spending pace midyear can greatly reduce the stress and anxiety many districts experience at the end of the year or when unexpected expenses occur.

Image of spending by category in Balance Manage

For this district, 75% of the total spending actually occurs after December 31st. Assuming this is a recurring trend, the pace should be adjusted to account for these types of trends.

Evaluating the Pace

Once the pace is calculated it’s time to see how school and department actual spending and remaining budget compares to the pace.

We generally use three broad categories to describe the pace:

  • On track indicates a school’s remaining budget is within 5-10% of the percentage remaining in the fiscal year. These schools are at low risk for overspending or underspending the budget at the end of the year

  • A slow pace indicates that the school has a higher percentage of budget remaining than the desired pace and could be at risk for underspending at the end of the year

  • A fast pace indicates that the school has a lower percentage of budget remaining than the desired pace and could be at risk for overspending at the end of the year

It’s important to remember that a source and pace analysis is not a forecast and should not substitute actual conversations that should be had regarding the pace of spending. Such conversations are critical components of a midyear budget review process to fully understand spending plans and make any necessary adjustments.

If your midyear review revealed that things aren’t quite what you expected, don’t fret. This is a learning opportunity and there is solace in knowing what’s happening with your finances, even if it’s not what you expected. Use your learnings to pivot and decide how to best improve over the remaining months.

If your midyear review revealed that you’re doing better than expected, use this as an impetus to improve your healthful spending patterns.

Balance Manage helps school districts view available account balances and track spending at the transaction level, providing districts with unique insights crucial for their mid year financial reviews, and affording them the opportunity to host frequent financial reviews throughout the school year. Learn more about how Allovue can help you manage your finances.

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About the Author

Kate Kotaska

Kate Kotaska is a Budget Director In-Residence for Allovue, Inc. Before joining Allovue, Kate spent the majority of her career in Denver Public Schools shaping the district’s resource allocation model and building a backbone of financial support known as the Financial Partner Network. As DPS' Executive Director of Budget and Finance, Kate was responsible for streamlining the district's budget process to maximize stakeholder engagement and transparency. Kate earned her undergraduate degree from Pace University in Pleasantville, NY.